Measuring Social Media ROI Part I: ROI? What ROI?

The popularity of social media is unquestionable. It has become ubiquitous to the point that its reach often seeps into other forms of media, sometimes even dominating the story. Every week it seems there’s a new tawdry scandal reported involving Twitter and elected officials or an aide to one. And it isn’t uncommon these days for a TV advertisement, show or magazine print ad to suggest to viewers or readers to “like us on Facebook” or “follow us on Twitter”. But what’s the social media ROI for social media marketing like we’ve seen so far?

We can all agree that there is value in social media for marketers, but how would we go about measuring social media ROI?

In a recent survey done by *Chief Marketer, 56% of digital marketers who took the survey said that the challenge of calculating ROI on their investment into social media was their biggest frustration with the channel. In a close second 55% said that not being able to link engagement to sales was their next biggest problem. These frustrations are leading many people to wonder, if high ROI happens in social media and no metrics are around to measure it, how do we know we’re being effective?

Why do Social if it’s such a Challenge to Measure?

Most people today profess a dislike for advertising. Whether we’re talking TV commercials or billboards, there is a certain amount of disdain people reserve for overtly promotional content. And so, marketing has had to evolve from its original primary purpose of pushing a message, to its purpose today which is starting a conversation and engaging with a brand’s target audience. So here are some reasons why social media matters, even if the ROI measurement is slippery (for now):

1. Learning the Platform isn’t Difficult

Social media is such a valuable marketing tool for companies that don’t have a large budget, or an in-house marketing team because it’s marketing that almost anyone can be trained to do it. Social media platforms (Facebook, Twitter, Google+, etc.) are free and relatively easy to use, and the role of these platforms is to provide a space where people can gather and share information in a way not typically perceived to be heavily associated with marketing (so far, however it is evolving).

As we pointed out in our post about Macklemore’s success in social media, the key to doing social media effectively is having people who are passionate about connecting with other people running those channels. And because the main focus of social media isn’t to market but to communicate, it’s much easier to assign social media tasks to a member of your team who may not necessarily have a marketing background. You don’t have to be a marketer to be an effective community manager.

You just need to understand how the different social channels function, listen to conversations your potential customers are having and know what content your company’s target customers are interested in seeing on those channels. Once you do this social media will become an even more valuable tool. And as a bonus engagement in social media – likes, shares, tweets, and other social signals are becoming increasingly more important contributors to SEO.

2. Easily Gather Valuable Consumer Information

With social media, not only are marketers able to communicate with their customers in a “marketing-neutral” space, but they can also find valuable information about consumer behaviors and habits on social sites like Facebook, Twitter and Google Plus. Users are voluntarily sharing a ton of useful information about their likes, dislikes and interests on social media sites – information that marketers would have had to work hard to gather on their own until not too long ago. And now it’s provided for “free” (in as much as anything is free) as long as they return the favor with good quality content and engagement.

The goals of social media marketing are the same as for digital and traditional marketing. The intent is to gather information about your customers, use that information to create relevant content (or ads) promoting a solution your customers are searching for in order to encourage them to visit your website and – eventually – make a purchase or otherwise convert.

3. Build Brand Awareness – Builds Product Value

Since all this valuable engagement with customers is happening online, marketers are desperate to figure out ways of measuring the value in those engagements, in order to determine the amount they should invest into the channel. However, social media is still evolving as a marketing channel and there aren’t any technical solutions currently available that can capture all conversions from social media.

Being able to measure return on marketing investment (ROMI) is a real concern for any business owner or digital marketing professional who may see the value in social media yet is unable to put that value into terms they (or their clients) can understand. Facebook’s beta testing of the “Want” button suggests that they’re looking for ways to help tie activity on their platform to real returns for users.

But just because measuring direct ROI from social media is a bit more difficult than measuring ROI in traditional marketing, doesn’t mean you shouldn’t do social media. Participating on social media channels allows you to build (valuable) brand awareness. This won’t necessary lead to a sale right away, but by creating a strong, trustworthy and engaged online presence you may be informing a future customer and helping them make a purchasing decision down the line.

Why the Challenge is Worth it in the End

The truth is the money you spend on social media should be measured in a different way than you would measure money spent on other digital marketing solutions. With a channel like paid search you can easily see if someone clicks on your ad, goes to your site, and buys your product, making measuring ROI much more straightforward (cost of clicks on your ad vs. the revenue generated over some time period).

Social media is considered more of a “top of the funnel” marketing channel, and is a great place to test your messaging and offers to see if they are resonating and if they are, incorporate that messaging into other direct response channels (like paid search). And so, social media marketing channels should be considered opportunities for building brand awareness and loyalty – once you figure out the value of that you can better measure the ROI of your social media efforts.

You may not get a customer to visit your website from your Facebook page, but if you are making connections with customers via Facebook hopefully they are sharing your content with their networks making it so that they as well as their networks can recognize your brand in the future and hopefully will convert later on down the line.

What do you think about using social media to market? What metrics have you developed to measure engagement?